Housing-income gap set to narrow for three quarters of England and Wales by 2025

The Office for National Statistics reported that 2021 saw an increase in the gap between average salary and house prices, with full-time employees spending around nine times their annual earnings on purchasing a home, up from eight times in 2020[5]. However, 2023 data from Halifax has revealed that house prices have fallen at their fastest rate in 12 years[6]. At an annual decrease of 2.6%, this is equal to a reduction of £7,500 off the average UK house price, indicating that prices could become lower relative to income[7].

In order to determine which areas of England and Wales are seeing a decrease in the gap between salary and house prices, Uswitch mortgages used historical median salary and average house prices data to forecast the same figures for 2025[8]. The predicted salaries and house prices, and the percentage change in these figures since 2022, allowed Uswitch mortgages to calculate which local authority’s homes will see the greatest change[9] *.

Table 1: Houses in this local authority will become X% more affordable[10]

Source: Uswitch.com

Across the 329 local authorities analysed, the 2022 average median income is £33,101[11], while the average house price is £270,000[12]. Homes in 253 areas are forecast to become more affordable, over three quarters (77%) of the local authorities analysed[13].

Allerdale, Cumbria, is the local authority expected to have had the greatest increase in home affordability by 2025, at a change of +21.5%[14]. The median salary in this area is forecasted to increase by 20%, from £33,849 to an expected £40,514 in 2025[15]. Meanwhile, the price of homes in the area is forecasted to drop by six percent[16], meaning residents of Allerdale may find houses more affordable by 2025.

Table 2: Houses in this local authority will become X% less affordable[17]

Source: Uswitch.com

76 local authorities are forecast to have less affordable homes by 2025, just under a quarter of all of the areas analysed (329)[18]. 

Three Rivers, a local authority in Hertfordshire, is expected to face the greatest decline in household affordability by 2025, at -21.5%[19]. The cost of houses in the areas is expected to rise by just under a third (31%), from £560,000 to £731,973[20]. However, residents’ median income is only forecast to undergo an eight percent increase (£37,361 to £40,205)[21], meaning that the increasing value of houses is far outpacing the average income in the area, making property less affordable.

Uswitch mortgages expert, Kellie Steed, shares tips on saving for a home:

“Our research has provided some promise to those in certain parts of England and Wales hoping to buy a new home in 2025. However, it’s important to understand that high mortgage interest rates could quell much of the balance we expect to see between wage growth and the cost of homes. In recent months, some lenders have cut their lending by almost 20% due to high mortgage interest rates impacting affordability, so how much the narrowing of this gap will help buyers to get the home they need will depend on the wider economic circumstances in 2025.

“That said, now is certainly a good time to start building your savings towards a deposit - especially with savings rates being at their highest in years. If owning your own home in the near future is a goal of yours, here are some things to consider when preparing your finances:

• Research ways to increase your deposit savings: If rates are still high, a large deposit will be even more important, as there are typically fewer higher loan-to-value products available. If you’re a first-time buyer under 40 years-old, you can use a LISA (lifetime ISA) to build up your savings more quickly. This government programme can boost your savings by 25% (to a maximum of £1,000) on deposits up to £4,000 a year. You could also look at buying jointly with someone else, more than one person contributing to the deposit is bound to speed things up. Lots of people buy with friends and families these days, so you don’t have to be in a couple to take advantage of a joint mortgage
• Cut your outgoings where possible: Do a financial review and look at your outgoings. If you’re renting, could you manage in a smaller or cheaper property for a short time, or even better, move in with relatives whilst you save. This might help you put a bit extra into your deposit savings. Lenders also look at your spending habits when determining how much you can afford, so being responsible in the period leading up to your application is likely to go in your favour.
• Speak to a mortgage broker: Did you know that you can seek advice from a broker before you’re ready to take out a mortgage? They can provide some great tips on how to best prepare for a future mortgage application that might not occur to you. You can even schedule a follow up appointment for when you expect to have enough of a deposit to begin the home buying journey.
• Check your credit score: Mortgage lenders review your credit history when deciding whether to lend to you, and how much you can borrow. You can check your credit score for free using websites such as Credit Karma and Experian. You can also take steps to improve it. For example, you can take out a credit card and repay it every month, to show that you can manage debt. You should generally also make sure other payments are made on time, and that you’re on the electoral register.”